Citation

One of the most talked-about new ideas in health care is rewarding providers for reducing medical spending by giving them a share of the net cost savings. Driven by an interest in seeing medical homes and other providers shift to some form of performance-based payment, as well as by the Affordable Care Act’s push for "accountable care," shared-savings approaches are currently being tested by numerous payer and provider organizations across the United States.

Given uncertainties regarding an ideal shared-savings approach and how best to implement it, we examined six shared-savings pilot initiatives. For each case study, we interviewed leaders at payer and provider organizations and state agencies about their attempts to design and implement shared-savings programs.

These pilot programs, we found, vary considerably on several dimensions (Exhibit ES-1). These include the patient populations subject to shared-savings arrangements, the health care services those arrangements cover, how payers determine cost savings and payouts to providers, whether the model incorporates performance targets, and how it measures performance. These pilot projects also vary in their early impact on health care costs and payouts to providers. For example:

One initiative measures cost savings related to preventable complications from specific procedures, and is on track to make a substantial payout to providers.

A second initiative does not require providers to serve a minimum number of patients to participate, uses a control group and 21 quality measures to determine payouts to participating providers, but has not yet demonstrated cost savings.

A third initiative requires providers to serve a minimum number of patients to participate, uses the average per-patient cost of health care in a metropolitan area as a benchmark, and has paid out up to 75 percent of shared savings to a provider.

Despite these variations, the case studies reveal consistent themes regarding shared-savings approaches to payment for health care services. These common elements include a willingness among most payers to absorb many of the costs entailed in setting up and sharing tools for measuring health care performance and cost savings. Overall themes also include a belief that shared-saving programs must evolve to include shared risk, and a conviction that even when pilot programs fail to achieve savings, they are moving in the right direction.

We do not yet know whether this approach is a long-term strategy for promoting better health care while lowering costs, or a transitional strategy to some other model, such as global payments for which the provider also assumes risk if spending is higher than a budget target. Exploring the organizational and environmental differences in how participants pursue shared-savings approaches, and the outcomes they achieve, will be key to determining whether they work, how to improve them, and whether and how to diffuse them.

EXHIBIT ES-1. KEY DESIGN FEATURES OF SHARED-SAVINGS PILOT PROGRAMS

MARYLAND MULTI-PAYER PATIENT-CENTERED MEDICAL HOME PROGRAM (MMPP)

MEDICA AND FAIRVIEW HEALTH SERVICES

HEALTH CARE INCENTIVES IMPROVEMENT INSTITUTE (PROMETHEUS PAYMENT)

Patients, Services, and Payments

Patient population(s)

Commercial; Medicaid
managed care

Commercial

Commercial; Medicare Advantage

Methodology for attributing patients to provider groups

12-month claims history

Most frequently visited provider (most recent if tied)

Johns Hopkins ACG software
and a 12-month look-back to determine site of at least
50% primary care spending

Mission

The mission of The Commonwealth Fund is to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society's most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults.